Political Science: Politics and Economic Globalization
Question 1: Is economic globalization irreversible? What does history teach us about this question? What is your own view, and why?
Globalization refers to the increased integration and interdependence between nations brought about by reduced border controls and restrictions. It is a situation where countries have become more connected economically through market liberalization that removes barriers to trade, allowing the free flow of goods, services, capital, and labor across nations. Before World War I, some nations practiced cooperation in terms of trade and security (Brawley, 2003). However, the war saw a disruption in international trade, pitting one country against another as participant nations in the war coalesced around major powers in the struggle.
In the past, protectionism and exchange controls have proven to be detrimental to economies. For instance, such policies led to the Great Depression of the 1930s and World War II (Cohn, 2016). The end of world war I and II saw a change in the world order. In 1944, the Bretton Woods Conference was organized in New Hampshire, where delegates from over 44 nations converged and developed a framework for international economic cooperation post World War II (Cohn, 2016).
The Bretton Woods conference led to the establishment of various institutions such as the International Monetary fund (IMF), the World Bank, then known as the International Bank for Reconstruction and Development. The establishment of such institutions was followed by the creation of the General Agreement on Tariffs and Trade (GATT), which became a key player in international trade (Cohn, 2016). The period before was characterized by colonialism, where countries in Europe held African states and other nations as their colonies. The colonies acted as a source of raw materials for their masters while offering a market for goods from the European countries. That shows nations can rarely survive on their own economically. Even during ancient times, international trade was necessary and still remains a crucial factor in the world economy. After the end of the wars, America emerged as a superpower and began exerting influence on the world economy through institutions such as the world bank, IMF, among others.
Countries over the world have become increasingly dependent on each other as a result of globalization. The emergence of technology has made the world a global village and revolutionized the way countries and their populations trade. Due to the strong ties and networks that nations have created with each other, globalization has been so much entrenched, and it is at the point of irreversibility. For instance, according to Newman & Farrell (2020), countries and especially the United States of America and China, have chained to globalization, and it is already too late to decouple. They argue that many nations have been chained to globalization practices, and they cannot change their economic operations even when their interests are threatened. Thomas Friedman, in 1999, suggested that the world had shifted from a system built around walls to a system established around networks.
The rise of the U.S. as a global power has put it to a position of influence where it controls the economic policies of many nations in the world. Globalization has seen the growth of digital networks, supply chains, and financial flows that spread across the globe. The U.S has taken advantage of the systems to advance its interests (Newman & Farrell, 2020), That has seen its interests collide with those of other nations like China, Russia, France, among others. For instance, America has been accused of infiltrating China’s communication networks and tapping on its communications. That has put China at a trade war with the U.S. with Beijing trying to control the World’s 5G communication network system through its giant telecommunications firm Huawei, in a bid to counter U.S. control of communication systems (Newman & Farrell, 2020). Besides, Japan has threatened to cripple South Korea’s electronics industry by withholding crucial industrial chemicals used in the electronics industry. That is in retaliation to Korea’s claim that Japan should take responsibility for abetting slave trade and forced labor. Those threats and counter-threats show how interdependent countries are and how difficult it is to separate them; hence globalization is irreversible.
According to Newman & Farrell (2020), globalization has resulted in creation of networks and interdependencies between nations that are too hard to break hence making globalization irreversible. Instead of countries becoming independent and having absolute control over their economies, globalization has led to unfair competition, external influence, and networks that have proved to be unbreakable chains. Despite the economic tensions between the U.S. and China, the two countries cannot cut their economic ties since they significantly rely on each other (Newman & Farell, 2020). The U.S. cannot hold China at ransom through its financial controls since China would develop alternate financial channels, depriving the U.S. of its superpower status.
In my view, economic globalization is irreversible. My opinion is informed by recent happenings in the world economy that have proven inter-nations dependence on each other is unbreakable. For instance, according to The Economist (2018), as the American-led, rules-based order fragments, other nations are forming coalitions of like-minded states to reinforce and maintain that order. Such a move is sparked by fears that America under Trump may not guarantee security and stability to allies who have relied on it since time immemorial. The contest between America and China over the control of the world economy has seen nations align their policies with either of the two. Therefore, globalization is irreversible since countries need each other to survive economically and security-wise.
Question 2. Many people argue that the global economic system that was created after World War II, embodied in particular in the IMF and GATT (later WTO), has been a great “success.” Do you agree or disagree, and why?
Yes, I agree that the global economic system established after World War II, spearheaded by the IMF and the GATT has been a great success. The primary reason why the two institutions were created was to prevent the adverse economic conditions experienced in the period between the two wars. The establishment of the institutions was spearheaded by North America, as America had already become a superpower since Britain’s hegemony across the world declined (Cohn, 2016). The IMF, GATT (WTO), and the World Bank were referred to as Keystone International Economic Organizations (KIEOs), due to the crucial roles they were to play in restoring the global economy to its feet.
These institutions were a success since they created an orderly economic system, devoid of the wars witnessed during the interwar period. Among the critical roles of the International Monetary Fund was to monitor a system of pegged or fixed exchange rates (Cohn, 2016). The exchange rates for currencies were pegged on the standard currencies, gold, or the American dollar. The reason why a standard currency was established was to prevent schemes such as the devaluation of currencies, which was rampant during the interwar period. Such a scheme led to increased economic wars during the interwar period. Therefore, the IMF managed to play its role in controlling exchange rates very well, such that devaluation games reduced relatively to the interwar period, and the global economy stabilized.
The IMF has managed to control exchange rates even in the current economy, though through a floating exchange rate regime. Actions by the IMF have helped to restore stability in the financial world, and therefore, it is right to say that the economic system established under IMF and GATT has been a success.
The economic system established after the war, spearheaded by IMF and GATT, was a great success. That is because these institutions played crucial roles in restoring economies that had been ravaged by war. A clear illustration of the institution’s significance in rebuilding the damaged economies is evident through their postwar European Reconstruction and LDC economic development (Cohn, 2016). it is through these institutions that the United States was able to help in rebuilding Western Europe, whose economy had been ravaged by war. The International Monetary Fund helped countries to solve short term balance-of-payments deficit by offering short term loans (Cohn, 2016). Such a move ensured countries did not resort to currency devaluation techniques to address deficiencies in their balance-of-payments. Such a move has been instrumental in maintaining order in the global economy and avoiding illegal schemes that would bring economic war. Such measures are a prove that IMF and GATT(WTO), have lived to their purpose of establishing order in the global economy.
The GATT was instrumental in preventing a return to cold wars in relation to international trade. After its formation, the organization streamlined international trade by championing the removal of tariffs in multilateral trade agreements (Cohn, 2016). It also developed and enforced international trade rules, whose purpose was to restore order and stability in international trade (Gilpin, 2001). To help in solving any future disputes and prevent a resurgence of war, the institution established trade dispute settlement procedures, which helped nations settle trade disputes amicably without resulting in a trade war.
The trade war between nations had occurred to a lack of structured framework and rules on how international trade should be conducted (Gilpin, 2001). Besides, there was no institution to enforce such policies. The two bodies played as regulators of the world trade hence preventing a resurgence of another trade war. They came to fill the void that existed. Since such a war has not reoccurred, we can conclude the economic system put up by these institutions was a great success.
Contrary, the two bodies have not been without blame in discharging their mandates. That is because trade war has continued to exist between some nations though not at the magnitude witnessed during the interwar period. For instance, the United States of America has continued to use its control of financial institutions to harass nations such as Iran and North Korea (Newman & Farrell, 2020). The institutions have not managed to promote free and fair trade without some “superior” nations influencing the economic directions of other countries. Besides, China and the U.S. have been embroiled in an economic struggle in a bid to establish their influence on the world economy. Such a battle has seen the United States frustrate Chinese companies in the country, such as Huawei.
Additionally, the U.S. has been accused of tapping into Chinese communications systems and unfairly accessing crucial information. Also, Japan and Korea have been embroiled in an economic struggle, with each country threatening to cripple the other’s leading economic sector. IMF and WTO have failed to effectively solve these struggles that threaten to throw the world into another cold war. Therefore, despite the two institutions establishing a successful world economic order after the war, they have failed in some areas.
References
Brawley, M. (2003). The politics of globalization: Gaining perspective, assessing consequences. Broadview Press.
Cohn, T. (2016). Global political economy: Theory and practice. Routledge Taylor & Francis Group
Gilpin, R. (2001). Global political economy: Understanding the international economic order. Princeton University Press
Newman, L. Farrell, H. (2020). Chained to globalization: Why it’s too late to decouple.”
The Economist. (2018). “Saving the world order: Picking up the pieces.”